Just a mini post here today as M. Jim Flaherty (Minister of Finance) just changed a few rules regarding Canadian mortgages:

#1 You won’t be able to qualify your mortgage application according to the very low variable rate of 2.25%. When you will ask for a mortgage to a financial institution, they will have to qualify your debt servicing ration according to the posted rate of the 5 years term. Therefore, as of today, it would be closed to 5.39%… this could jump your monthly payment by $350/month on a $250,000 mortgage if we compare payments for a 5.39% and a 2.25% interest rate.

#2 You won’t be able to refinance your mortgage more than 90% of your house value. The previous mortgage rule was allowing individual to finance up to 95% of their market value.

#3 If you are looking to buy a rental property, you will have to put a minimum cash down of 20% of the market value. No more low cash down / big mortgage with rental properties.

Why changing the mortgage rules?

The explanation is quite straight forward: while the interest rates are not going to jump from 2.25% to 5% shortly and the housing market keeps reaching new high from months to months, the Canadian government had to find a solution to slow down the housing market.

It other option was obviously to play around with the mortgage rules in order to protect the Canadian consumers from themselves. Since the average Canadians don’t seem to be able to manage their budget properly and Canadians banks are more than willing to lend them money, someone has to put their foot down and avoid another housing bubble, right?

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The other day, I was talking about how I picture my perfect house and what I would like to see in it. While I am definitely not convinced we will pursue the cause and purchase a new home in the next year, I thought I would upgrade a few details in our current home to improve it.  In this way, we will be able to sell it quickly and for a higher price if I ever need to.

We spend a lot of time in our house yet we are often ‘too busy’ to make changes; to paint or to keep it fresh and up to date.  We have been living in the same house for 3 and a half years and the rooms were last painted 8 years ago. While the choice of colors was great, it starts to lose its depth and freshness after so many years. Some rooms definitely need some improvements . So before we sell our house, there are a few things to look at.

As is the case for most projects, I thought of sharing the changes we have in mind. The best aspect of all is that most of them don’t cost much to do and add a lot to the look of the property. Since most people buy because they fell in love with the house, you are best served making those small improvements so you can sell faster and make more money

Paint

While fresh paint is often quite obvious, it is often ignored or abused. If you are thinking about selling, you want your house to look impeccable. Fresh paint gives this feeling of “new”. Instead of going with colors demonstrate your individualis, go with neutral tints that match the look of your house (classic, modern, etc.). A new look on the first floor should be your priority. Those are the first rooms your potential buyers will walk into. You want to create a good impression .

Luminosity

Luminosity equals a feeling of space when you walk into a house. This is why you should select light colors on your walls and avoid heavy and dark curtains. You want to give the impression that there is plenty of light, and therefore space in each room. Don’t hesitate to add lighting if you don’t have many windows.

Furniture

I’ll probably sell my old sofas and my dining room set and buy new ones before I move to my next house. While I take the risk they won’t fit into my new home, they will help creating a nice ambiance on the first floor. Since I am seriously done with my kitchen table (it is at least 25 years old and show the war wounds to prove it!)  I don’t really see this as an expense incurred to sell my house but more as a necessary upgrade to our lifestyle in any case.

Adding storage space

You can never have too much storge space! Think about unused areas of your house and look at ways to add a cabinet to improve its storage abilities while reducing clutter. I am exploring the addition of a second set of shelves over the existing ones I have in my laundry room. I have a high ceiling but nothing over the washing machine. This will help us by hiding the Christmas decoration boxes .

One last point…

If I realized that I can pay back my parents on time, I will probably complete an overall facelift in my living room. I would like to add a fireplace and completely change the appearance of its decor. Since this is the first room to strike your eye when you enter the house, it will give an awesome first impression to the future buyers. However, if I want to do everything I want in the living room, the bill may approach $4,000… I’m not sure if it’s worth it or not…

What do you think?  Please offer comments, suggestions.  I appreciate any and ideas during this brainstorming period…

image source: mescon

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Since a very young age, I became accustomed to changing houses every two to three years. For a while, my parents used to buy a property, renovate it and flip it. Therefore, I have lived in 12 houses and I am only 28!

I guess this is why I am starting to look for another house already! After living in our house for the past 3 years, we have been searching the web for another home. We haven’t put our house for sale (we actually have several things to do before it is ready to market), but we are already looking to see what is available.

I guess we will be looking for a very long time because the list of things we want in our next house is quite extensive. So before talking about how we will modify and make our house more “marketable”, I will talk about what I am looking for in my “perfect house”.

Land and privacy

I am not a big fan of the suburbs. In fact, I prefer living downtown or far away . Why look at the 2 opposites? Because a loft downtown and an acreage property represent 1 similar point: privacy. While living downtown means that you live in the middle of a crowd, everybody minds their own business. As for the acreage property, well, you just don’t have to see your neighbours that often . Since I have a young family, I would rather have large plot of land than live in the middle of the urban jungle (read ‘city’). While I am not going to become a gentleman farmer just yet, I am looking more for a plot  around 40,000 to 60,000 square feet. I would like to have a lot of trees so I can spend a nice afternoon outside under the leaves breathing fresh air.

Garage

I do have a garage right now andI all I can say is that I really appreciate it!  (all men need a cave ) There are a tons of things that can fit in it and there is nothing more important than a car in a garage when it is -20 degrees outside!

A room over the garage

We tend to see this more and more often. Having an additional room over the garage offers the option of having a fourth bedroom on the second floor. You can also make this room a home theatre, a home office or a playroom. This gives great flexibility and space.

Open area

I don’t really like when the kitchen, the dining room and the living room are separated by walls. I like the impression of space when there are no walls. This also helps with luminosity in each room.

And a few other extras…

Since I am only at the “dreaming stage” and I am not calculating the full cost of everything I want, I started to stray into dangerous territory: everything I would like in my perfect house. This is why I would add a few other things….

A fireplace

I really like the look of a fireplace in a living room. It entices people to gather around and sit down to chat. It is also very relaxing. In a perfect world, the fireplace would be in the middle of the house so it would allow for slight delination between the dining room,  living room and has four open sides, a kind of hearth… whoa! That must be expensive!

More windows

If I would be fortunate enough to live on a bigger parcel of land with a lot of trees, I would add another room next to the dining room. I would be like an indoor porch adorned by windows from the knees to the 10 foot ceilings. This would be our reading and relaxing spot. Then again, this option is probably quite expensive!

Walk-ins

I just love clothes! And since I don’t have one where I live, I would definitely like to have a walk-in in my next house, most likely two (to keep the peace). This would allow me to separate my suits from my casual clothes. And it would also make it easier with my better half rather than share this space with my wife

What about you?

I would be curious to know what would you include in your perfect home? Which modifications have you made to your current place to make it better? It would likely give me some additional ideas

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Own or not to own, that is the question! It is almost everyone’s dream to own a place to call home, your home. If you are young, you are probably debating if you should buy or rent. This is an interesting question, especially if you intend to live in a big city like Montreal for the next few years.

Should I be giving my money away to a landlord?

Or should I squeeze my budget to fit in a mortgage payment?

Some people may say that a condo costs as much as an apartment depending on where you live. In fact, the mortgage payment may be close to your monthly rent but there is much more to it. You have to consider condo fees, municipal taxes and maintenance costs just to name a few. Therefore, we are talking about at least $400 more in monthly fees. On the other hand, you are not giving your money away to someone else. You are giving it to the bank Seriously, there are a lot of points to consider on both sides:

Good points to renting:

- You are not responsible for the maintenance (BUT you still have to clean).

- It requires less cash flow.

- You don’t have any maintenance costs to pay.

- You can move almost whenever you want (landlords’ rights are very limited!).

Bad points to renting:

- You will never see the color of your money.

- You can miss a great opportunity in the housing market.

- Instead of putting money aside (as you would be by paying down a mortgage), it is easy to simply spend it elsewhere and not build equity in a savings account.

- Your landlord can be a lousy dude that doesn’t care if your toilet leaks for days before dealing with it.

Upside of ownership

- You are building equity (beware; a principal residence is a poor investment in terms of absolute yield).

- You can modify / renovate as you want.

- You can always rent it in the future.

- It is easier to get credit because you have a tangible asset (don’t argue, I’m just saying that banks love to see property on a balance sheet!).

Downside of ownership

- Condo fees can increase over time.

- It is harder to move fast (time to sell, mortgage penalty, etc.).

- It obviously requires more cash flow (and it would be a good idea to have an emergency fund or a line of credit in case you need to repair something).

So, to the question of ownership, there is no obvious answer (as is the case for many personal finance questions!). One may prefer to enjoy freedom and rent an apartment where as someone else may choose to buy a condo in order to build equity faster (so they hope).

In my opinion, I would consider buying a condo if you think you will live there for more than 5 years. Your chances of benefiting from an increase in the housing market are pretty good and you would probably make a good deal selling it 5 years later.

Another interesting option if you don’t mind roommates would be to buy a condo and find a roommate to split the fees. In this fashion, you would pay the same thing as you would in an apartment but you would build equity (financed by the roommate) in the meantime. Foreign students may be an interesting type of clientele as they usually have the money to pay (financed by Mommy and Daddy) and they don’t stay more than 1 year.

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Yesterday, I wrote about the fact that I truly believe that we can still make money out of the stock market. I think that there are 3 main ways to make a lot of money (there is technically a 4^th one which would implicate you working like a damned demon for a company for several years and hope to get the VP position). The first one is to invest in the stock market. This one is quite “easy” as if you simply buy ETF’s and wait 30 years, you will wake up one day with a lot of money! However, it requires golden guts

The second option that we will be discussing today is through rental properties. This is the baby boomer’s classic success story of the guy who didn’t have much education but was a hard worker. He pilled up his money to buy his first property, than his second one and he bought a land, build 20 properties on it and he is now living by the lake… I must agree with you that I also fell in love for this story. We all know people who succeeded through real estate. We all know them because real estate is easy to see, buildings last and it makes us think it is safer.

However, while I still think that we can make money through real estate, it is far from being a safe investment. There plenty of risk that you must consider (illiquidity, default payment from renters, major repairs, drop in value (think of the American market), etc.). So don’t think that it is that amazing! What is really cool though, is that it can be used as a big “dividend tank” that send you money months after months!

Why you can still make money with real estate:

Depending on where you live, there are several reasons why you can still make money through rental properties. The major point is that borrowing doesn’t cost much right now. I am convinced that people who have the guts to borrow as much as they can today will be greatly rewarded in a few years. We have a unique chance of paying almost no interest in order to buy depreciated assets… Doesn’t this sound like the opportunity of a lifetime?

The second point is that there are a lot of rental properties which has been depreciated in value. This is probably a great timing to start looking around and look at how much it would cost to buy real estate in your area. Unfortunately, this is not the case everywhere. In Quebec, value didn’t drop much. In fact, my house keeps increasing in value years after years. However, I would be curious to look at properties in Florida!

The third point is the blessing of having a recession (say WHAT?). Well if people start losing their job, they will probably consider selling their house and start looking for an apartment. Therefore, you have better chance of getting renters. On the other side, it might become harder to get paid on time Nonetheless, the demand for apartment will definitely increase in the upcoming year. I don’t think that young couple will get their first 350K mortgage at the age of 25 anymore… they will stay in an apartment for a few more years and gather more money before buying! This would be the client you should be looking for!

Any thoughts on real estate investing?

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