Why are real estate prices going so high in Toronto right now? Well, you have a fixed supply of available housing, but you have several different groups of people – foreign investors, millennials, new couples, young families and professionals on the move – all looking to live in one of Canada’s hottest cities. The province has put in place some regulations for the lending and mortgage industry that should make the market calm down a bit, but that is not expected to last.
RE/MAX recently released their 2017 Spring Market Trends Report, and the numbers are still spinning upward. The average residential sale price has gone up 29% in the last 12 months and is nearing $900,000 – but it’s not just the big, detached homes pushing the numbers. The average price of a condo has crossed the $500,000 line for the first time this year. A lot of people looking to downsize are trying to take advantage and use their profits to find a nice place outside the metropolitan area.
The luxury home market is now moving homes for prices between $3 million and $6 million. The hottest luxury neighborhoods in the area are Rosedale, Yorkville and that Bayview corridor in North Toronto. In Bayview, the average home sale price in 2016 was $1,421,700 – a 68 per cent increase in price over just three years before.
Looking for something a little lower in price point in Toronto? The Woodbine Corridor neighborhood is a strong one, with a 2016 average home sale price of $821,500, a three-year increase of 40 per cent. You’ll find lots of families and couples just starting out, but you also get a lot of amenities – and you’re close to the city center. These are just a couple of the neighborhoods that are popping in one of the hottest real estate cities in North America.
So what does this mean for HOS Financial investors?
The entire Greater Toronto Area continues to skyrocket in value, and in a situation like that, a lot of people who apply for mortgages will experience difficulty in gaining loan approval despite having the means to afford the payments on a home, and so the “rent to own” scenario could help keep them out of another year – or longer – in the rent cycle. A lot of people think that “rent to own” means looking down a small set of listings on the back of the classifieds and having to settle for much less in terms of quality. However, in the aftermath of the 2008 housing collapse, more and more people are hearing “no” from traditional lending sources. Bank lending guidelines have become much more conservative, particularly in the areas of credit score and income verification. That means that a lot of people who would have qualified for loans before – and have the means to purchase homes in upscale parts of Canada, including the Toronto Region – need alternate forms of financing. If they don’t have the large down payments that private lenders ask for, then they often end up looking for lease purchase or Rent to Own Programs.
Even if you don’t have the money to purchase an investment property and put it on a lease purchase or Rent to Own agreement for two or three years, you can still pool with your funds with the money from other investors and buy a property through the HOS Financial system utilizing Joint Venture.
Here’s how it works. You invest, either as a sole owner or as part of a group, in a property. In many cases, a borrower/tenant has approached HOS Financial with interest in a particular house, and then you invest in that house. The borrower/tenant then puts down a deposit – typically a minimum of 5% of the Purchase Price. This will eventually go toward the down payment at the end of the Rent to Own agreement, but for now it is your security deposit.
Then the borrower/tenant starts paying rent each month. The rent is set at or near the top of the local market, and then on top of base rent the payment includes a monthly contribution toward that eventual down payment. This extra amount is known as an option Credit, Credit you will give the tenant when they exercise the option to buy the house at the end of the Rent to Own Term. You benefit from the interest on that money – and in the unlikely event that the borrower/tenant cannot qualify for bank financing when the lease term ends, you get to keep most of the money – the deposit, the rent and the extra payments for down payment credits.
But in a very high percentage of our Rent to Own Programs, the borrower/tenant fixes his or her credit or income history issues over the course of the lease purchase agreement and exercises the option to buy the house. HOS Financial screens potential borrower/tenants just as carefully as the banks do, and we have developed a reliable system for identifying people who are (and are not) likely to succeed in tour Rent to Own program. So at the end of the Rent to Own Program, you walk away with the principal you invested plus the Monthly Cash Flow and Profit on the Sale to the Tenant. At that time, you can either invest in another property or pursue other opportunities.
Interested in what HOS Financial has to offer? Give one of our rent to own specialists covering the Toronto 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 HOS Financial is the right investment choice for you.