The feverish increases in the Ontario real estate market continue without any signs of slowing – and the Waterloo Region is right in the thick of things. For example, in April 2017, 766 residential sales took place in Kitchener, Waterloo, and Wellesley, Wilmot and Woolwich Townships. That’s even higher than the 729 that took place in March, and an increase of over 14 per cent of the totals from April 2016.
Even more impressive is the increase in average sale price. In April 2016, the average home sale price was $367,032. In April 2017, that number had jumped to $512,656 – more than 40 per cent higher, and the median price was $475,000. Detached homes averaged $594,453, which is a 40.1 per cent increase over April 2016. In the semi-detached home market, the increase was about 48 per cent over the year, up to $415,709.
In the townhome market, the average price went up about 39 per cent from April 2016 to April 2017, averaging $377,531 last month. Apartment-style condos increased about 18 per cent to $267,455.
It is the gap between supply and demand that is fueling this increase. More and more people are looking outside Toronto, and the dwindling supply means that values are going to keep going up. The fact that 985 properties were listed in the Kitchener-Waterloo Association last month – a 17.8 per cent increase over April 2016 and the first time since 2015 when listings in that association got near 1,000 in one month.
So what does this mean for HOS Financial investors?
In a market like what we’re seeing in the Waterloo Region, a lot of would-be buyers will run into financing issues with lenders despite having the means to afford the payments on a home, and so a “rent to own” program is becoming very attractive way to eliminate 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, the number of people looking to enter rent to own contracts has increased dramatically. Bank lending guidelines have tightened up, 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 Waterloo 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 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.
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 us 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 five grand. This will eventually go toward the down payment at the end of the agreement, but for now it goes into a savings account.
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 that the payment includes a monthly contribution toward that eventual down payment. 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 all the money – the deposit, the rent and the extra payments for down payment credits.
But in most cases, the borrower/tenant fixes his or her credit or income history issues over the course of the lease purchase agreement. 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 this system. So at the end of the lease purchase, you walk away with the principal you invested – plus three years of rent payments.
Interested in what HOS Financial has to offer? Give one of our rent to own specialists covering the Peel 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.