Episode 4 My Journey – Investing in Toronto Condos – Turning $39,300 into $1 Million

May 9 / 2017

Episode 4 – Alexjwilson.com’s Reaction to Ontario’s Fair Housing Plan

Welcome back to Alexjwilson.com and episode 4 of my journey of growing $39,300 into a million dollars. Last week, we talked about the fundamentals of the Toronto real estate market and why it’s poised for long-term growth. I talked about this last week, because I wanted to set us up today to talk about my reactions to the Ontario’s Fair Housing Plan and it’s impacts on the market.

First: 15% Foreign Buyer Tax:

The foreign buyer, as defined by the act, is someone who does not have Permanent Residence/Landed status or is not a Canadian citizen. It doesn’t apply to non-residents who are Canadian Citizens. If you’re living in another country and are a Canadian citizen, it does not apply to you.

Other exceptions include:

  • if you are a foreign student studying in Toronto for two years;
  • if you are here on work permanent and you’ve been working here for a set number of years.

Beyond this, I can tell you that there is very limited foreign buyer activity in Toronto. If you’ve ever witnessed a pre-construction sales centers, you may have noticed the range of prospective buyers inside.  These buyers vary in their ethnicities and spoken languages and have names that look different from an Anglo-Saxon name. This does not make them foreign buyers. Toronto is the most international city in the world with over 51% of our population being foreign. If over 51% of our population was born in another country, doesn’t it make sense that pre-construction sales centres are made up of visible minorities? These are individuals who are buying their first property here in Canada or buying an investment property here in Canada.  It does not mean they are buyers from overseas. When these individuals are relocating here to Canada, they’re bringing their money with them as well. Their money is being invested into Canada and specifically into real estate in Toronto.

I’m able to tell you this, because I know the names of the clients to whom I sell properties and I look at their driver’s license. These clients are from Canada.  When speaking with developers, they tell me that their buyers are from Canada. It is not buyers from overseas who are purchasing these properties. I really need you guys to get that out of your head. Toronto does not have a foreign buyer problem; it’s new immigrants to Canada who are bringing their money into Canada to invest in Canada.  Money coming in is a good thing; money going out is bad.  This is great for our Toronto economy.

Second: Vacant Property Tax:

If we look at condos, there are no vacant condos. These condos are in the open rental pool and are being rented out to individuals who are looking for places to live. These units are active, especially in the Downtown Core.  Look at the buildings; there are people in the elevators. Speak with property management; all the units contain occupants their buildings. We do not have a vacant property issue here in Toronto. This tax is irrelevant for the condo market.

Third – Rent Controls:

Previously, if a unit was built after 1991, we had the discretion as an investor or a landlord to increase the rent to whatever we wanted at the end of a lease term. Now, we don’t have that ability anymore. A specific rate has been set by which we’ll be able to increase our rents. This is going to work out in the long-term for landlords.

Firstly, this will decrease purpose-built rental buildings. That’s going to decrease the rental inventory coming on the market.

Secondly, tenants have locked into today’s rental rates, therefore potentially staying in units longer.  As a result, reduced turnover of tenants moving from unit to unit. The reason being is that they’re locked in at yesterday’s market rate. Why would they move into a similar unit at a higher rental rate?

What this means is our less than 1% vacancy rate in downtown Toronto is going to be strained even more. We will have less rental inventory coming on the market from the purpose-built side along with less rental turnover from existing inventory. New condo buildings coming to the market are going to be at a higher rental rate because there is going to be a supply and demand issue. With even less rental supply coming to market and continued population growth, rents will go up for these new rental properties. Landlords will also be less inclined in negotiating the rents knowing that the rent they accept will be the rental amount moving forward. They are going to be very firm on their rental rates on these properties.

On next week’s episode, we’ll talk more about the idea of rent control, how the rich get richer and how we’re going to make you richer with these rent control models. We’ll also show you how you can go on your journey of using rent controls to make you more money.

My RANT – The issue of privilege:

I wanted to end off today by asking a question:

When did it become someone’s right to own a freehold property here in Toronto?

I don’t understand that. We are in the economic capital of Canada. 20% of GDP and population of Canada comes from the Census Metropolitan Area of Toronto. We should have price growth because this is the area from where much of economic activity for the country comes and this is the area in which people want to live. We have a pure supply demand issue on the freehold housing side; a decreasing supply of freehold housing, and an increasing population, resulting in increasing demand equals increased prices of properties.

Let me tell you a personal story about this. The price escalation in Toronto regarding people’s affordability has been going on for a very long time. I’m from a small town in Northern Ontario called Capreol. It is 45 minutes north of Sudbury. We were a dead end railway community. There is nothing past my small town of 4,000 people. My father worked the Canadian National Railway (CN) as a carman. In the ’90s, he was threatened with a layoff notice. I remember my family discussing, “Okay, we’re going to have to relocate to the Toronto area for your father. He may be getting laid-off so he may have to take a job down in Toronto.”

My father did not end up getting laid-off and we didn’t move to Toronto. A few years ago, I asked my mom:

“Mom, remember when we had to potentially relocate to Toronto?  To what area were you thinking of moving?”

I’m getting all excited thinking:

“In what cool area were we going to live?”

She said “Orangeville.”

Orangeville was the area that they were looking at. Do you want to know why they were looking at Orangeville? Because in the ’90s, my family couldn’t afford to live in Toronto. When did it become someone’s right and privilege to live in Toronto? My parents couldn’t do it in the ’90s. The reality is they had to look far outside of the city for an affordable place to live. When did it become an individual’s privilege to live in Toronto or even in The Greater Toronto Area? Orangeville is not in the GTA.

We are the economic capital of Canada. It’s expensive to live here. That’s the reality of the situation and that’s why we have these condo towers going up. If you want the convenience of living close to work or on a transit line, you are going to have to sacrifice space and live in a condo. You need to change your perception of what the reality is going forward. If you’re living in Toronto, there is a good chance you may have to start raising your child in one of these boxes in the sky. That’s the reality of the situation. It’s not a bad thing. It’s just a change of perspective. We’re a growing economy. We’re a growing population. That’s what we need to realize. It’s not an issue regarding escalating prices and a lack of affordability. It’s that people must change their perception and the new reality is that people are going to be living in condos and raising children in condos. I hope you agree on that and if not, we can have a longer discussion but that’s the reality of the situation.

Let’s talk a little bit about gentrification before I go. When I graduated from university, I was looking at an end row townhouse at Logan and Eastern Avenue. In 2004, it was not a desirable area. The Hells Angels had their clubhouse on Eastern Avenue and Jilly’s still existed on the corner of Broadview and Queen. Leslieville hadn’t experienced gentrification yet but you know what happened? Desirable areas became unaffordable for individuals who wanted to be close to work.  They looked at the less desirable areas and started buying homes in those areas. As a result, Leslieville which was a less desirable area in 2004, became a more desirable area a few years ago and is now a top demand area in 2017. You are going to be paying a million dollars to live in Leslieville. The increased value in Toronto is a good thing because it takes these areas and cleans them up. It brings wealth to these areas and you start spreading around the wealth which we talked about last week’s episode.

The next step is what we need. We need “people moving” to expand to other areas of the city. Once you “open up” these areas to people, you’re going to see gentrification come, values increase, and then a leveling out of the values across the city. This is the reality of what the situation here is in Toronto. We need people moving and that will help level off the playing field for the supply and demand issue. There is lots of land in the GTA still to develop without developing into the Green Belt. We just need the people moving and a change of perception. Living in a condo is okay.

Well, I’ve ranted enough. As I said, next week we’re going to talk about how rent control can be your friend and how the rich can get richer. I’m going to make you rich and teach you how to get richer by using the rent controls to your advantage.  Looking forward to speaking to you on that. Okay guys, Alexjwilson.com making your dreams come true. Hope you can join me on my journey and start your journey on growing your initial down payment and turn that into a million dollars. Contact details are below. Talk soon guys. Bye bye.

 

Alexjwilson.com #1 Agent At RE/MAX Condos Plus 2016

Alexander J. Wilson B.A.
Team Lead: Alexjwilson.com

TOP 1% Condo Sales in Toronto 2009-2016

Titan Club 2016
RE/MAX Hall of Fame

RE/MAX Life Time Achievement Award
Sales Representative
RE/MAX Condos Plus Corp. Brokerage

Email: contact@alexjwilson.com
Office: (647) 352-5181
Mobile: (416) 996-5181

Website: http://www.alexjwilson.com

If you are moving ANYWHERE in the world – contact me… I know the best agents.

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CONTACT ME

Alex J. Wilson, B.A., Sales Representative
Condos Plus corp., Brokerage
45 Harbour Square
Toronto, Ontario, Canada
M5J 2G4

Mobile: (416) 996-5181 Office (416) 203-6636

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