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A Mississauga woman’s retirement plan included buying homes. A lot of homes

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When Lisa Nagy’s marriage ended in 2014, so did her secure financial future. Her adviser suggested she buy houses.

By 2017, Nagy owned six homes.

Lisa Nagy with her poodle Lucy in front of a house she owns in St. Catharines. Nagy’s financial security strategy is based on property investment, and she owns six houses.
Lisa Nagy with her poodle Lucy in front of a house she owns in St. Catharines. Nagy’s financial security strategy is based on property investment, and she owns six houses.  (Michel Villeneuve)

“In three years, I’ve lived through bounced cheques, four basement floods (one caused $40,000 damage) and interest rate hikes,” she says of the various stress factors. “But there is a long game here and it is my future.”

Her first purchase as a newly single woman in 2014 was a $460,000 house in Mississauga she bought as her own residence with cash from her divorce settlement.

Rising home prices put buying a second house in Mississauga out of range, so in 2015 Nagy looked to more-affordable real estate in St. Catharines. She attended a Rent to Own (RTO), and wanted to try the concept of being a landlord with the option to sell in three years. With RTO, tenants either make a non-refundable deposit towards the purchase of the house, or pay a higher rent with a portion going toward the purchase.

Nagy found an older bungalow in St. Catharines and bought it for $270,222 in May, 2015, with five per cent down and a mortgage on the rest. (Investment properties now require a 20 per cent down payment.) She got 3,000 responses to her ads seeking a tenant and within eight days had rented the house to a woman who had gone through bankruptcy due to divorce and needed a place for her and her mother to live.

“The ideal RTO person is someone who maybe had a rough patch in their financial history and aren’t quite out of the rough yet, but in three years should be able to qualify for a mortgage,” says Nagy.

After consulting with her mortgage broker, Daniel Patton of Butler Mortgage in Toronto, she bought an $180,000 townhouse in Niagara Falls as an RTO, in September, 2015.

Both RTO tenants each gave her a non-refundable deposit of $5,000 to put toward the purchase of the houses at agreed-upon 2018 prices, based on 2015 Canadian Real Estate Association data that then projected a 4.5 per cent annual increase was reasonable for the Niagara area.

In 2016, Nagy bought a second St. Catharines bungalow for $319,000 putting the down payment on her line of credit and mortgaging the rest. This time, with her retirement finances in mind, she rented it to a long-term tenant while the property’s value climbed — similar houses in the area are now selling for $465,000.

“I call this the ‘GO Train house,’ because once the train goes to St. Catharines, the price of this house will skyrocket,” Nagy says.

In 2017, she researched other Ontario markets and found Windsor offered potential, with a new bridge under construction, a large new hospital and proposed high-speed train. She bought two homes in Windsor in 2017 for $187,000 and $167,000. She used her line of credit for the down payments and took out mortgages.

“The Windsor houses rent for $1,400 and $1,276 each,” she says of the properties she describes as “my most profitable homes.

“My mortgage payment (for both houses) is $700 a month, so I have an $800 surplus a month (after property management and insurance costs) that pays off the line of credit,” she says.

In St. Catharines, Nagy is selling her first RTO home after the tenants didn’t qualify to buy it. “Between when I bought it and now, the price has gone through the roof.”

When you sit down with your advisers, ask them: "If this was your money, what would you do?" recommends homeowner and property investor Lisa Nagy.
When you sit down with your advisers, ask them: “If this was your money, what would you do?” recommends homeowner and property investor Lisa Nagy.  (Dreamstime)

Her second RTO tenant qualified for a mortgage and Nagy turns ownership over to them this month, realizing a profit of more than $55,000.

“I’m happily looking forward to selling my second and third houses (the RTO purchases in St. Catharines and Niagara). My financial planner says the money from those sales are my fun money and I should buy whatever I want, as the remaining three properties will fund my retirement.

“So, I’m putting in a pool at my own house next year … and my daughter and I are going on a pretty fantastic trip.”

Nagy has two pieces of advice for others considering property investments: 1. Trust everything will be OK. “There is always fear; it’s like jumping off a cliff and trusting that your parachute will open;” and 2. Have people you trust, including your real estate agent, financial planner and mortgage broker. Ask them “If this was your money, what would you do?”

Nagy’s mortgage broker Daniel Patton says successful real estate investing starts with having a detailed meeting with a financial adviser to fully understand your finances and to get financing pre-approved. A banker or broker should explain about refinancing, lines of credit and the ins and outs of adding a mortgage.

“It is tougher to qualify for financing now, and you need to understand the differences between a banker and broker,” Patton explains.

Patton also notes that financial institutions have different views of rental income: one bank factors 50 per cent of rent as income when approving loans; other banks will look at 80 to 85 per cent.

Successfully owning multiple properties, Patton adds, is about having a passion for real estate and putting time into it. “If you work 40 hours a week at another job, you need people who are going to help manage your properties — but you are still doing to have to do your research. For any return, you have to put in some work.”

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Renovating your home? Ask yourself these 8 questions first.

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(NC) You might be surprised to learn there are many health hazards around the home, particularly when taking on any kind of renovation project— even for something as easy as painting a room. But by educating yourself and taking the right precautions, you’ll help keep you and your family safe.

Here are eight important safety questions that Health Canada encourages you to ask yourself before starting your project:

  1. Could the products I am using be harmful? Be sure to follow all use and safety instructions on the label, including how to store and dispose of any leftover products. Remember to look for hazard symbols.
  2. Should I be worried about lead-based paint? Your home probably contains lead-based paint if it was built before 1960. If the paint is in good condition and is not on a surface that a child might chew or that is subject to wear and tear, it’s best to leave it alone or cover it with paint or wallpaper. But if the paint is cracking, chipping, flaking or peeling, or is on a surface that a child might chew or that is subject to wear and tear, you’ll need to remove it carefully to avoid kicking up lead dust.
  3. Could my house contain asbestos? Before 1990, asbestos was commonly used for fireproofing and insulating against cold weather and noise. You can reduce your risk of exposure by hiring a professional to test for asbestos before doing any renovations or remodelling. Avoid disturbing asbestos materials yourself.
  4. Are low-emission products available? Paints and renovation products, like flooring and particleboard, often have a noticeable smell. This odour can indicate that the product contains volatile organic compounds (VOCs). Some chemical products are labelled as “low emission,” which means they give off fewer VOCs and are safer for your health.
  5. Should I ventilate while I renovate? Yes – ventilation can help improve indoor air quality by removing pollutants from the home and by bringing in fresh air from outside. This is especially important when renovating or when using chemical products in the home.
  6. How should I dress? Labels on products used for renovations will include information about what to wear and precautions to take. This could include using gloves, safety goggles or masks and keeping the products away from other hazardous materials.
  7. Can my family take part? It’s best to keep children and pets safely away from the renovation area. Pregnant women should also avoid taking part in renovation projects.
  8. How do I dispose of leftover materials safely? As your project wraps up, continue to keep safety in mind. Read the label or contact your municipality for advice on how to dispose of any leftover chemical products.

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Here’s How Halton Real Estate Patterns Have Changed Over the Years

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We’ve said it once and we’ll say it again, the real estate market is constantly fluctuating. In a recent inhalton article, it was noted that the Toronto Real Estate Board (TREB) called 2018 “a volatile year” for the housing market.

Although 2019 is expected to a little bit better in terms of sales and average selling prices in Toronto and the Greater Toronto Area (GTA), we still have some 2018 statistics and facts that may come as a shock to some Halton residents.

According to a recent RE/MAX Ontario-Atlantic Canada press release, migration patterns of residential homebuyers in the GTA have shifted west. This, according to the release, is due to the Halton Region’s and Toronto west’s market shares rising between 2013 and 2018.

The release notes that the Halton Region captured 10.1 per cent of total market share in 2018, leading with a 2.3-per-cent increase over 2013. On the other hand, Toronto West climbed almost one per cent to 10.5 per cent. The release also looked at market sales in the Peel Region, Toronto Central, Toronto East, York Region, Durham Region, Dufferin County, and Simcoe County.

Over the past five years, there have been many factors that have contributed to Halton’s increase market shares.

“Growing demand for affordable housing buoyed new construction and contributed to rising market share in Halton Region over the five-year period,” Christopher Alexander, Executive Vice President, RE/MAX of Ontario-Atlantic Canada, said in the release. “Product was coming on-stream at a time when the GTA reported its lowest inventory in years and skyrocketing housing values were raising red flags. Freehold properties in the suburbs farther afield spoke to affordability.”

As a result of people flocking to the Halton Region in order to avoid these skyrocketing housing values, an increase of construction and development has become quite common for the region.

According to the release, new housing starts in Halton was averaged to be around 3,100 annually between 2013 and 2016. Between 2013 and 2017, almost 39,000 residential units came on-stream in Toronto’s Downtown and Central Waterfront areas.

Another real estate pattern that has changed, that may not come as a shock, is the average price to buy a house.

The average price for a home sold in Toronto’s west end in 2018 hovered near $755,658. The ever-increasing prices, as noted by Alexander, will have an impact on what type of properties will be more popular in the future.

“Freehold properties remain the choice of most purchasers in Halton Region and Toronto West,” Alexander said. “The same is true to a lesser extent in Toronto Central, but condominiums continue to gain ground. Just over one in three properties sold in the GTA was a condominium in 2018 and that figure is higher in the core. As prices climb in both the city and suburbs, the shift toward higher-density housing will continue, with fewer single-detached developments coming to pass.”

In recent years, as a result of increasing prices, many buyers, including younger buyers, empty nesters, and retirees have shifted towards Simcoe County where the average price ranges from $528,942 to $746.

“As the millennials move into their homebuying years, they will displace baby boomers as the dominant force in the GTA’s real estate market,” Alexander said. “Their impact on housing will have a serious ripple effect on infrastructure in the coming years, placing pressure on transit systems, roadways, local economies and their abilities to attract investors and new businesses, parks and greenspace development.”

However, there has been a demand for condominium apartments and townhouses areas like City Place, King West Village, and Liberty Village. There has also been gentrification in many Toronto neighbourhoods such as Oakwood-Vaughan and Dufferin Grove as they offer smaller freehold properties at more affordable prices.

Over the next 10 years, the increase in demand is projected to re-ignite homebuying activity in Toronto East, York, Peel, and Durham Regions regardless of the affordability, lack of available housing, and fewer transit options that may be apparent now.

What do you think of these shifting real estate patterns in Halton and the surrounding areas?

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How sweat equity and a little home DIY can help you avoid a down payment on mortgage loan

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Saving a down payment is challenging for many first-time home buyers, and even if they manage it, more obstacles lie ahead.

After choosing a lender and getting approved, buyers still have to find a good house that fits their budget. Looking at fixer-uppers can expand their options, but not everyone can afford major improvements after such a big purchase.

Buyers could find a solution in Home Possible, a low-down-payment conventional mortgage from Freddie Mac. These loans offer an attractive option for borrowers willing to apply a little elbow grease: a sweat equity provision that can eliminate the need for a cash down payment.

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Sweat equity allows buyers to “earn” their entire down payment by improving a home before purchase, says Danny Gardner, senior vice president of affordable lending at Freddie Mac. Buyers do the work themselves, and the change in appraised value after the renovations becomes a credit they can apply to the purchase.

Some conditions apply: Using the sweat equity feature requires home improvement know-how and money to purchase materials. The sellers also must be willing to let someone work on their house before buying it.

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But in the right situation, this feature gives first-time home buyers more bang for their buck, particularly in markets where move-in ready starter homes are hard to come by.

Young homeowners love to DIY

America’s desire to bootstrap home improvements could be attributed in part to something known as the “HGTV effect,” which refers to a recent surge of popular home improvement reality shows and YouTube channels featuring do-it-yourself experts.

Thirty-eight percent of all home renovation projects are DIY, according to NerdWallet’s 2018 Home Improvement Report.

Younger homeowners are especially eager to roll up their sleeves – those under age 35 complete more than half of all their own home repair and improvement projects instead of hiring a professional. As a result, they spend several hundred dollars less on a typical project, the report found.

With sweat equity, DIY-obsessed home buyers may be able to channel that energy into a more affordable home.

Who can use the sweat equity feature?

Buyers interested in the sweat equity feature should talk with a lender that offers Home Possible loans. The option is open to any borrower who meets general financial guidelines.

“Home Possible is a great loan program,” says Keith Kampe, vice president of sales at Flagstar Bank. “The only challenge is getting people into it, because there are income limits.”

The program sets household income limits by census tract, an area that’s usually similar to a neighborhood in size. Freddie Mac has an eligibility tool that lets users see the limits by property address.

No matter how you slice it, buying a house requires some money upfront. For sweat equity borrowers, each dollar spent improving the property before purchase pulls double duty as a credit toward their down payment.

But before they can break out the power tools, sweat equity borrowers have to find the right house and a seller who’s comfortable with the unique arrangement.

“There has to be a lot of trust there between buyer and seller,” says Joe Zucht, a loan originator at NBKC Bank. Those looking to buy from a friend, family member or their current landlord may already have that trusting relationship, he says.

If both parties are on board with a sweat equity arrangement, the buyer’s real estate agent will draft an offer that describes all planned improvements and explains what will happen if the deal falls through. Once the agreement is signed, the work must be completed by the buyer before the loan closes – in other words, before he or she owns the house.

Sweat equity borrowers should also be ready for an appraiser to look over their shoulder throughout the process. The appraiser will estimate the value of the remodel and verify that the materials and workmanship match what was promised in the contract.

It’s important for sweat equity borrowers to choose their presale improvements strategically, weighing the money and effort required against the down payment credit they’ll earn. Buyers should also be realistic about their DIY skills and avoid biting off more than they can chew.

While some changes are merely cosmetic, others are capital improvements that can significantly increase the property’s value, extend its useful life or adapt it for new uses. These are typically bigger projects that could include installing a new roof, renovating the kitchen or adding a garage.

Even though it’s a more intense commitment, Gardner says buyers who hope to capture the full benefit of their sweat equity should “focus on capital improvements because once you become the owner of that home, you can always make the cosmetic improvements.”

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