During the first two months of 2017, the real estate activity in the Halton region – and throughout the Greater Toronto Area as a whole – was off the charts. The GTA set the highest year-to-year gains within the four major metropolitan markets in all of Canada during that time period. This was particularly true for properties valued at $1 million or higher (including single family dwellings, attached dwellings and condominiums), in which the GTA saw an 87 per cent increase to 3,043 properties sold, according to Market Wired. This sort of performance is expected to continue throughout the spring of 2017. While the market is perking up across Canada, the GTA is pulling away from the rest of the country, and there are no signs of things slowing down yet.
Why are things looking so rosy in the Halton region right now? Well, there are several national and regional numbers that should give real estate investors encouragement. In the last quarter of 2016, the Canadian economy grew at an annualized rate of 2.6 per cent – 30 per cent higher than the projected growth of 2.0 per cent. In February 2017, the Conference Board of Canada’s Index of Consumer Confidence shot up 9 points to 110.6 – the top level since 2009. The two provinces with the highest increases in consumer confidence were Quebec and Ontario, which is fitting given that so many of the new full-time employment opportunities in Canada showed up there. Even in Alberta, though, which has been hit hard by the drop in crude oil prices, that index rose by more than eight points to 67.5, its top level since March 2015. In BC, that index rose 2.3 points to 126.4.
Nationwide, unemployment is on the downturn in Canada. In February 2017, the national unemployment rate dropped to 6.6 per cent, the best number in more than two years. Toronto’s rate remained at 6.6 per cent, but the optimism throughout the economy still has home values surging.
For investors looking from abroad, the Canadian dollar remains low – still sitting at 0.74 per $US1 through the end of March 2017. This means that Canadian real estate makes a terrific investment vehicle for American purchasers, as well as purchasers from other countries. The Bank of Canada has kept its benchmark interest rate at a historically low level (0.5 per cent in March 2017), while in the United States the Federal Reserve moved that benchmark interest rate range up to 1 per cent, a sign that the American economy is strengthening, but also making credit available at lower interest expense north of the border.
One factor that makes time somewhat of the essence in this decision-making process has to do with a series of policy changes in Canada, ranging from municipal and provincial to federal levels, which will impact mortgage approval and property transfer taxes – the first of which would involve all purchasers but the second of which would influence international investors. Moving before those changes take place could end up saving investors a significant amount of money.
So what does this mean for HOSI investors?
The lease purchase market is significantly more robust than it was even a few years ago. The changes in the mortgage industry in Canada over the past decade have made it a lot harder for many people to secure financing from traditional sources – banks and brokerages. The private lending market has grown as a result, but the high down payments that those entities usually require also keep a lot of people who have the means to pay for a home out of the market.
However, a lot of people are just a year or two (or maybe three) away from having the credit score and the down payment they need to qualify for a bank loan. They’ve found the home they want to buy, but they don’t want to watch the purchase price move up for three more years while they keep renting. They want to lock in an agreed price now, and they’re willing to pay rent on it for the first few years, saving money for a down payment.
This is where you come in as an investor. Even if you don’t have the money to purchase an investment property and put it on a lease purchase agreement for two or three years, you can still invest with partners in a property through HOSI’s system.
Here is a condensed version of the Real Estate Investing process with HOS Financial. We promote our Real Estate Investment opportunities to Investors who have enrolled with HOS Financial to receive Opportunity Notifications. If you are interested you call for the Due Diligence Documents. Once all the documents are reviewed and you agree to move forward and work with the family, we are onto the Financing and Agreement Stages. Normally, Real Estate Investors like to leverage and use OPM (Other People’s Money), namely Banks. You buy the property and are the Sole Owner upon the completion of your financing. Contracts are drafted and agreed to before you close on the Mortgage financing whereby the terms are clearly identified. These Contracts are drafted and given to both you and the tenant to receive ILA (Independent Legal Advice) before signing. Once agreed to, we are onto closing the mortgage financing. At close, the security deposit the client is offering is transferred to you. This amount will reduce your overall Net Investment and help with the ROI and CoC percentages for each Real Estate Investment Opportunity. Each month, the tenant will pay a “All Inclusive” Lease payment. It is a combination of Market Rents + Property Taxes + Home Insurance + Down Payment Top Up (20% of total payment). The Down Payment Top Up is often referred to as Option Credits…Credits the tenant will receive when they exercise the Option to buy the home from you. This money is paid to you monthly and will represent part of your Cashflow but at the end it is a Credit you will give the tenant when they apply for their Exit Mortgage financing. You have access to this cash each month and in the end, it is a credit on paper that is used for the tenants exit mortgage. The end of Term Purchase Price is predetermined and the Initial Down Payment + Option Credits are disclosed on the Purchase Agreements and accepted by lenders as valid Down Payment accumulation. You do not have to return the cash back to the tenant at closing. If things go south for the buyer, then you get to keep that deposit plus the down payment credits as well less agreed to percentage of refundable deposit in case of default. Having said that, our default rate is low as we screen borrower/tenants as rigorously as the banks do, and we weed out the vast majority of the problem applicants.
So you can expect to get your principal back at the end of the lease purchase term. Then you can either reinvest it in another property or walk away with your principal plus Profit you received with monthly cashflow and the sale proceeds at the end of the lease purchase term.
Interested in what HOSI has to offer? Give one of our rent to own specialists covering the Durham region a call today. We have helped many investors turn a profit that rivals gains from mutual funds and stock investments without the risk that the markets represent. We look forward to talking to you and helping you decide whether HOSI is the right investment choice for you.